Significantly Declined Startup Enthusiasm... Corporate 'Birth Rate' Hits Lowest in 8 Years

Statistics Korea '2021 Business Birth and Death Administrative Statistics Results'
Domestic New Businesses Decreased by 36,000 Compared to Previous Year
Birth Rate at 14.5%, Lowest Since 2013

[Asia Economy Reporter Song Seung-seop] Last year, the domestic business birth rate in South Korea recorded its lowest figure in eight years. This trend was more pronounced among smaller-scale and one-person businesses. On the other hand, despite the decrease in new businesses, the number of high-growth companies growing over 20% increased.

According to the '2021 Business Birth and Death Administrative Statistics Results' released by Statistics Korea on the 22nd, the number of new businesses in South Korea last year was 1,022,000, down 36,000 (3.4%) from the previous year. The 'birth rate' fell by 1 percentage point during the same period to 14.5%. The birth rate is one of the representative indicators showing industrial dynamism, expressed as the percentage of new businesses out of the total active businesses. This is the lowest birth rate since 2013, when it recorded 13.9%.

The number of new businesses decreased significantly as their scale became smaller. Companies with sales under 50 million KRW dropped from 783,000 to 738,000 last year, a 5.8% decrease compared to the previous year. Except for a slight decrease of 1.2% in companies with sales between 500 million KRW and 1 billion KRW, new businesses increased in all other sales brackets. New businesses with sales exceeding 10 billion KRW surpassed 1,000 for the first time.

Small business owners, who account for 97.7% of new businesses, numbered 1 million, down 3.55% from the previous year. When classified as small and medium enterprises (SMEs), they shrank by 3.44%. Based on the number of employees, one-person new businesses, which make up 90% of the total, decreased by 4% to 920,000. In contrast, businesses with two or more employees increased by 1.7% to 102,000.

By industry, new businesses in real estate decreased by 51,000 (16.6%) from 306,000 to 255,000. Real estate accounts for 25% of all new businesses. Business facility management, which dropped from 30,000 to 25,000 new businesses, showed the second-largest decrease at 15.6%, followed by accommodation and food services, which fell 4.2% from 155,000 to 148,000.

The survival rate of new businesses remained at a similar level. As of 2020, the one-year survival rate of new businesses was 64.8%, unchanged from the previous year. The electricity, gas, and steam sector had the highest survival rate at 90.6%, followed by health and social welfare (83.9%) and manufacturing (72.3%). The financial and insurance sector (52.5%) and business facility management (58.8%) had lower survival rates. The five-year survival rate rose by 1.7 percentage points to 33.8%.

Although the number of new businesses declined, high-growth companies growing over 20% increased. Last year, there were 4,995 high-growth companies, an 18.5% increase from the previous year. The proportion of high-growth companies also rose by 0.2 percentage points to 2.1%. The information and communication sector showed the highest growth rate at 33.8%, followed by transportation and warehousing at 32.6%, and construction at 28.3%. Companies growing over 10% numbered 15,064, up 14.6% during the same period, with their proportion increasing by 0.7 percentage points to 6.2%.

‘Gazelle companies,’ which have achieved an average growth of over 20% in sales for three consecutive years, also increased by 14.6% to 1,385. Construction saw the largest increase at 85.2%, followed by information and communication (20.9%) and professional, scientific, and technical services (15.5%).

The number of business closures was 761,000 in 2020, up 25,000 (3.4%) from the previous year. The closure rate remained similar at 11.2%, down 0.1 percentage points. The highest increase in closures was in real estate at 11.3%, followed by information and communication at 10.6%. Among companies with sales under 50 million KRW, 593,000 closed, the only sales bracket to see an increase in closures.

The total number of active businesses last year was 7,056,000, up 235,000 (3.4%) from the previous year. Real estate, wholesale and retail trade, and accommodation and food services accounted for 57.5% of all active businesses. Active businesses with sales under 50 million KRW numbered 3,557,000, an increase of 59,000 (1.7%), and one-person active businesses rose by 182,000 (3.4%) to 5,567,000 compared to the previous year.

This content was produced with the assistance of AI translation services.